After a four-week trial, jurors found fallen crypto-currency mogul Sam Bankman-Fried guilty of seven charges of fraud, conspiracy, and money-laundering. Debating the former billionaire’s future over pizza, their deliberation lasted about as long as the running time of a late-period Martin Scorsese film.
They had plenty of evidence to work with: internal communications, documents, and, perhaps most incriminating of all, Bankman-Fried’s own words. Over and over, prosecutors argued that his public statements differed sharply from how he actually ran his companies. Promising customers and lenders and investors one thing in public and doing the opposite in private is fraud. And Bankman-Fried made a lot of promises.
The now convicted FTX C.E.O. may be awkward, but he’s never been shy. On his way up, he gave numerous interviews, appeared onstage with former heads of state, glad-handed on Capitol Hill, attended exclusive parties, and starred in FTX ads, ensuring that he was not only the public face of his company but also of crypto in the United States. If you challenged him publicly on Twitter, he might have responded with a private D.M. It wasn’t uncommon for journalists to receive late-night messages from Bankman-Fried, who seemed to always have more to say.
Among tech executives, he was unique: open, available, relatively unfiltered, almost desperate to be liked. And for a while, it worked. Bankman-Fried became ubiquitous on Twitter and in financial media, an object of fascination if not adulation. Was he really a genius? Why did he dress like that? He was a billionaire and drove a Toyota Corolla? The oddball persona was incorporated into FTX’s marketing efforts, and as Bankman-Fried rose, so did FTX and his hedge fund, Alameda Research.
But we now know that Bankman-Fried’s unpolished appearance—mogul-on-the-make too busy to comb his hair—was a carefully constructed persona all along. According to the testimony of Caroline Ellison, the former C.E.O. of Alameda Research, this seemingly absent-minded slob thought a lot about how he was perceived.
He traded down from a luxury vehicle and encouraged Ellison to do the same. In interviews, he emphasized his naps on beanbags, but not his $35 million penthouse apartment. Even the unkempt hair was strategic. “He thought his hair was very valuable,” Ellison testified. “He said ever since Jane Street [Capital], he thought he had gotten higher bonuses because of his hair and that it was an important part of FTX’s narrative and image.”
However ridiculous it might seem in retrospect, the business press ate it up. After FTX collapsed, in November 2022, Bankman-Fried spent the month preceding his eventual arrest appearing on Good Morning America, writing on Substack, posting bizarre tweets, and hobnobbing, via video feed, with Andrew Ross Sorkin at a ticketed New York Times event. Perhaps Bankman-Fried thought he could talk his way out of trouble, just as he had talked his way into it.
But Bankman-Fried’s loquaciousness and his carefully tended public image ended up being pivotal to the case. Over four days of uncomfortable testimony, Bankman-Fried was forced to answer numerous questions about past public statements in which he variously promised that FTX’s assets were secure, that Alameda had no special privileges on the FTX exchange, and that the company didn’t gamble with customer assets—statements which he now claimed not to remember. Bankman-Fried said some version of “I can’t recall” more than 140 times during his cross-examination.
“He thought his hair was very valuable … he thought he had gotten higher bonuses because of his hair and that it was an important part of FTX’s narrative and image.”
“He lied about big things, and he lied about little things,” Assistant United States Attorney Nicolas Roos said during his closing statement. “He asked for terms to be defined that he used freely on direct examination a day earlier. He approached every question like up was down and down was up.”
Drawing on reams of evidence and the testimony of former FTX executives who pleaded guilty, the government successfully argued that Bankman-Fried was in control, that it was his decision to pour billions in customer funds into real estate, political donations, start-up investments, and endorsements. And it was his decision to spend more—including a billion dollars on a Bitcoin mine in Kazakhstan—when some of his colleagues warned him that his companies were approaching insolvency.
About all this, Bankman-Fried repeatedly claimed ignorance, saying that his employees must have been spending money without his knowing. He claimed that he only learned about the $8 billion hole a month before FTX collapsed. When he had asked his employees about it, Bankman-Fried testified, they told him that “I should stop asking questions because it was distracting.” In crypto world, success is the fruit of individual genius, but failure apparently takes a village.
Throughout the trial, Bankman-Fried and his lawyers failed to offer a coherent exculpatory counter-narrative. Backed by Signal chats and Google documents, Bankman-Fried’s erstwhile friends and colleagues gave clear, precise testimony. Their former boss, in contrast, rambled his way into verbal cul-de-sacs, often responding to yes-or-no questions with monologues that would eventually be interrupted by an objection, followed by an admonishment from the judge.
In his closing statement, Mark Cohen, the lead defense lawyer, settled on “good faith” as a defense, claiming that Bankman-Fried believed he was acting honestly in the best interests of his stakeholders. “Good faith,” Cohen claimed, “is a complete defense to all the charges in this case.” He was, essentially, asking the jury to believe that Bankman-Fried is a good person who was simply in over his head. It was a picture starkly at odds with the prosecution’s portrayal of Bankman-Fried as a calculating, authoritarian boss who used one of his six computer monitors to track Alameda’s finances in real time.
Bankman-Fried’s erstwhile friends and colleagues gave clear, precise testimony. Their former boss, in contrast, rambled his way into verbal cul-de-sacs.
In the last days of FTX, Bankman-Fried allegedly told Can Sun, a company lawyer, to devise a justification for the movement of FTX customer funds. According to Roos, Sun told Bankman-Fried that it couldn’t be done. At the time, Roos said, Bankman-Fried offered no pushback, simply replying with his customary “yup.” It was only later, when forced to defend himself in court, that Bankman-Fried cited FTX’s terms of service. Yet when Assistant United States Attorney Danielle Sassoon asked Bankman-Fried to identify where in the terms of service it stipulated that he could use customer funds, he was unable to do so.
Sam Bankman-Fried’s rise was so vertiginous that one might be forgiven for having assumed there was some kind of elite intelligence at work. O.K., he made a hash of it all, but didn’t he found two companies with billion-dollar valuations and convince leading financiers and venture capitalists—not to mention millions of customers—to trust him with a lot of money?
As the postmortem has made clear, Bankman-Fried’s enterprise was a shitcoin casino built on hype, low interest rates, graft, and the mystique of its eccentric founder. Founded in 2019, FTX scaled quickly into one of the world’s largest crypto exchanges. It offered an easy way for people to buy and sell crypto, as well as access to margin loans (for financing trades) and volatile crypto derivatives (bets on the future value of crypto-currencies) that were illegal to market in the U.S. Crucially, it presented a new source of capital that Bankman-Fried dearly needed to keep his company—and his lifestyle—going.
To entice customers, FTX handed out FTT as a trading reward. Alameda Research, which owned most of the FTT in existence, marked up the value of its FTT holdings to secure billions in dollar-denominated loans from lenders. Essentially, FTX printed its own money to use as collateral and then lied about its worth. It’s as if someone went into a major bank and put up Chuck E. Cheese win tickets in return for a home loan.
Despite the fact that they handled vast sums of other people’s money, and even made loans, FTX was unable to get a bank account, so the exchange instructed customers to send money directly to Alameda. (Later, they told customers to send funds to an account held by North Dimension, a fictional electronics retailer invented by Bankman-Fried and company lawyer Dan Friedberg.) In court, Bankman-Fried claimed that his hedge fund acted as a kind of payment processor for FTX, but in fact it was used to embezzle customer funds that should have been untouched. Hollowed out by Bankman-Fried’s compulsive spending and his lieutenants’ blind loyalty, FTX was an unsustainable business that couldn’t survive the first market downturn it encountered.
Alameda Research was similarly mismanaged. Despite serious undisclosed advantages—a $65 billion line of credit, access to FTX customer data, and the ability to secretly withdraw FTX customer funds—FTX’s associated hedge fund often lost money on its trades and, under Bankman-Fried’s direction, made illiquid long-term investments when his exchange needed steady infusions of capital. The company survived on the billions of dollars it took from FTX customers and from billions in open-term—and fraudulent—loans. In court, some of Alameda’s lenders said they would never have agreed to extend credit if they had known the true state of its finances.
FTX printed its own money to use as collateral and then lied about its worth. It’s as if someone went into a major bank and put up Chuck E. Cheese win tickets in return for a home loan.
Bankman-Fried’s criminal defense was similarly inept. Unlike his former colleagues, the ex-C.E.O. couldn’t seem to explain what happened—certainly not with any cogency or brevity. His disordered testimony proved disastrous, an astonishingly reckless and flat-footed attempt to wrest narrative control from the prosecution that revealed Bankman-Fried, and his lawyers, as utterly unprepared. Deciding to testify in a case like this is an enormous risk, which is why it’s typically discouraged by lawyers. For Bankman-Fried, it was at once an act of ego and of desperation. But then, he has always been indifferent to risk.
In his closing statement, Cohen made dozens of references to Bankman-Fried’s supposed “good faith,” sounding like Barbara Fried, Bankman-Fried’s mother, who told The New Yorker, “Sam will never speak an untruth. It’s just not in him.” Casting his client as a nice guy who made mistakes, Cohen told the jury that Bankman-Fried “didn’t want to hurt anyone, far from it. He didn’t want to defraud anyone, and he didn’t.”
The prosecution, naturally, took a different view. “Because he thought he was smarter and better,” Roos said, “he thought that he could figure his way out of it, he could walk his way out of it and talk his way out of it.” But Bankman-Fried succeeded only in shredding what little remained of his former wunderkind reputation.
He had a year to prepare, yet in the end he mustered the kind of Who, me? defense that one would expect from a college student caught cheating on a test. Now facing decades in federal prison, Bankman-Fried has secured his place alongside Bernie Madoff and Elizabeth Holmes in the pantheon of American fraudsters. His speedrun from obscurity to immense wealth and international renown to infamy lasted less than five years. Possessing a con man’s self-assuredness and, as he told Michael Lewis, a sociopathic indifference to other people’s emotions, Bankman-Fried’s real talent was his comfort with deceit.
Jacob Silverman is a co-author of Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud
